Luminant overpowers Alcoa as three-week show trial ends

Luminant won “The Big Trial’s” war of words and battle for the bucks last week as a 20th District Court jury tossed out Alcoa’s half-billion dollar lawsuit.

Not only did Alcoa fail to win any damages, the jury decided the aluminum company should pay damages to the energy firm to the tune of $10 million.

The jury, which sat through almost three weeks of complex testimony, took less than three hours to decide, returning its decision just after 5 p.m. last Wednesday, June 2.

It was a dramatic last day with lead attorneys making closing statements and Luminant’s Barry Barnett delivering a scathing attack on Alcoa’s corporate culture.

‘Doesn’t have a soul’

Barnett portrayed the aluminum company— Milam County’s largest employer for more than a half century until 2008—as an entity which made a calculated business decision to shut down Rockdale Operations, then blamed Luminant.

Ratliff “Alcoa has surely lost its way in Milam County,” Barnett said.

“Alcoa doesn’t have a soul but it does have a culture,” he added. “Its culture is to throw its weight around and say ‘change contracts so we can make more money or we’re going to ship your jobs to Saudi Arabia’.”

“All that’s important to them is making money and blaming others,” Barnett said. “That’s not a healthy culture. That’s not the culture of Luminant.”

Barnett accused Alcoa of “harvesting” the Rockdale Operations smelter, getting all the financial benefit from the facility, then closing it, intending then to purchase power from Luminant to re-sell for profit.

Alcoa had indicated a successful conclusion to its lawsuit might be a factor in a possible future re-start of the smelter. Barnett disagreed.

“The fact is, I’m sorry to say, this smelter is permanently closed,” Barnett said. “Alcoa can’t get any benefit out of it (declaring Rockdale Operations permanently shut down), until 2013.”

‘Not the old TXU’

Alcoa lead attorney Shannon Ratliff levied much the same philosophical charges against the energy company.

“Alcoa is the same company it has always been” Ratliff said. “What has changed? TXU (Luminant) is not the old TXU. What began to emerge in 2005 is a change in attitude.”

Ratliff never uttered the P-word (perjury) but did accuse some defense witnesses of straying from their original statements.

“I have not been reluctant to point out when their testimony conflicted with what they told me (in depositions) under oath or what they wrote at a time when they believed no one would see it but those in their inner circle,” he said.

Ratliff reviewed Alcoa’s charges that the company was damaged by Unit 4 power outages in 2008 and by the cost of selective catalytic reduction (SCR) anti-pollution equipment for Unit 4, ordered in a federal consent decree, for which Alcoa was ordered to pay 83 percent of the cost.

He said TXU viewed the consent decree mandate on SCR technology as an opportunity.

“(They thought) ‘we now have you snarled in the consent decree. You’re on the hook no matter what the cost’,” Ratliff said.

He said an original estimate of around $100 million on the SCR ballooned to $277 million.

Ratliff said Sandow 4 is currently the only plant in the TXU system with an SCR.

He also accused Luminant of employing stalling techniques when Alcoa attempted to discover information about the ballooning price tag.

“They’d come up with some questions and then some more questions and then some more. I call it the rope-a-dope,” he said.

‘Lifeline’

Barnett saw the SCR saga from a different perspective.

“Alcoa violated the Clean Air Act not once, but hundreds of times,” he said. “That led to the consent decree.”

“Then they asked us (Luminant) to throw them a lifeline and be their scapegoat,” he said.

‘Commercial honesty’

Ratliff maintained Luminant/TXU knew Unit 4 was “at risk” for several years and did not maintain the unit.

“There were poor plant conditions and poor asset management,” he said. “They had the obligation to maintain and operate that unit in an economic manner and they did not act with commercial honesty.”

“Sandow 4 is a substandard unit,” he said.

Ratliff said, as a result of the 2008 power problems, Alcoa paid $12.8 million in additional power costs in the spring of 2008.

He said Alcoa was entitled to recover that sum, along with $257.3 million in future capital depreciation, $29 million as the cost of idling three potlines at Rockdale Operation and preparing pots to re-start and $14.8 million for Luminant’s failure to comply with the original Alcoa agreements.

That adds up to just under $315 million, not the $500 million frequently cited as the damages figure being sought.

‘Fact of life’

Barnett said Luminant had produced documents from Alcoa executives which he said indicated they were already trying to convince other execs to shut down Rockdale Operations “and simply sell the power” before the outages occurred.

He reminded jurors Alcoa executive John Thuestad admitted under cross examination there was no interruption in power to the Rockdale smelter and that Alcoa did not actually pay the $2,000 to $4,000 per megawatt hour price for power during the outages it had often cited.

Barnett said Alcoa had tried to create the impression that, under the contracts, Sandow 4 was a unit dedicated to providing power to Rockdale Operations.

“Sandow 4 is not a dedicated unit,” he said. “Power could come from the grid or from Unit 5.”

“Outages are a fact of life (in the power generating business),” Barnett said. “Alcoa knew in advance about the outages.”

“Even with a bad year in 2008, Sandow 4 out-performs its peers throughout the country,” he said.

As for the SCR price, Barnett reminded jurors of the testimony of Fluor executive Don Broeils who said he did not believe a different SCR design would have satisfied the federally-mandated consent decree.

“Judge Sparks, we did what you ordered us to do,” Barnett said.

Books and records

Jurors did find for Alcoa in one area. The aluminum company maintained Luminant had not opened its books and records to Alcoa, as called for in their agreement.

Jurors agreed with that assertion but Judge Ed Magre’s charge to jurors did not provide for assessing any penalties.

Damages

Jurors awarded Luminant $10 million, the amount Alcoa has not yet remitted as part of its share of SCR costs. Here’s how the jury answered the judge’s charge, which came in the form of several questions:

• Did Luminant fail to comply with the Sandow 4 agreement with respect to planned and unplanned outages in 2008? No.

• Did Luminant fail to comply with the Sandow 4 agreement with respect to costs incurred for the SCR system? No.

• Did Alcoa fail to comply with the Sandow 4 agreement by failing to pay its share of the SCR system cost? Yes.

• Was Alcoa’s failure to comply excused? No.

• What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Luminant for its damages? Ten million dollars and no cents.

• Did Luminant fail to comply with the Sandow 4 agreement with respect to Alcoa’s access to “books and records?” Yes.

Alcoa’s corporate headquarters has not yet commented on whether an appeal is planned. QUOTABLE

“Alcoa doesn’t have a soul but it does have a culture. Its culture is to throw its weight around and say ‘change contracts so we can make more money or we’re going to ship your jobs to Saudi Arabia’.”

“Alcoa violated the Clean Air Act not once, but hundreds of times. That led to the consent decree. Then they asked us (Luminant) to throw them a lifeline and be their scapegoat.”